UPDATE TO LAKE EFFECT’S AUGUST 27, 2025 BLOG ON THIS TOPIC
In July 2025, the Trump Administration’s signature budget bill became law as Public Law 119-21. Of note for employers and employees, the bill permits tax deductions for “qualified tips” and a portion of overtime pay, as detailed in this IRS Fact Sheet.
In August, IRS released a draft updated W-2 (see prior blog) and pledged to provide guidance on the “reasonable method” that employers should use to “approximate” the amount of “qualified tips,” that employee can deduct.
To date, the IRS has not released that guidance and has not issued a final updated W-2 for 2025.
Last week, the IRS announced that employers will not face penalties for failing to comply with the Act’s reporting requirements and that it would not publish a final updated W-2 for tax year 2025.
Employers are advised to consult with their payroll administrators to ensure that employee tips and overtime are adequately tracked and reported.
The attorneys and HR professionals at Lake Effect can provide guidance on employment-related executive actions, employment laws, regulations, and agency guidelines. We continue to monitor important legal and HR developments, as well as other information that could impact the workplace. Please watch our blogs and emails for these important updates, as well as discussions of how compliance meets culture. To dive into these issues, contact us at info@le-hrlaw.com or 1-844-333-5253.
